Subcontractor relations pose some of the greater challenges in the construction industry. Many of the issues are common to the entire contractual chain, although some are unique to subcontracting. All three cases covered in this issue involve subcontractor relations, addressing the change order process, the effect of a settlement agreement, and obligations to a prime contractor’s take-over surety, respectively.
A Kentucky appellate court ruled on a contractor’s bad faith in administering the subcontract change order process. The subcontractor’s initial change order requests were not precisely itemized or sufficiently documented, but the contractor ultimately paid nothing on requests later determined to have been justified.
The Alaska Supreme Court considered the effects of a settlement agreement that released all obligations under the subcontract. The agreement did not end the matter but had consequences – perhaps unintended by the contractor – on the dispute resolution rights of the parties.
And, a federal appeals court addressed a take-over surety’s ability to hold accountable a subcontractor to the defaulted prime contractor and the performance surety of that subcontractor. The subcontractor entered into a ratification agreement with the take-over surety, but the sub’s surety did not bond that agreement.
